Vote Appears to Take White House by Surprise

The failure of the $700 billion financial rescue bill in the House appeared to represent a populist rejection by both Republicans and Democrats of Bush administration’s top-down approach.

The Treasury’s plan, which had strong backing among some Democratic economists as well, focused on rescuing banks while giving less attention to the problems of ordinary working families. In the end, members on both the right and the left evidently concluded it was too skewed to Wall Street.

The result appeared to take the White House by surprise.

During a meeting with Ukrainian President Viktor Yushchenko in the Oval Office, President George W. Bush – looking tired and a little worried – said he would be meeting with his economic advisers on Monday afternoon to figure out how to proceed. He added that the administration would be “working with members of Congress, leaders of Congress on a way forward. Our strategy is to continue to address this…economic situation head on, and we’ll be working to develop a strategy that will enable us to continue to move forward.”

The president reiterated that he had proposed a big solution “because we got a big problem.”

Shortly after noon, less than an hour before the voting began, White House spokesman Tony Fratto had predicted the votes would be there.

“I think we’re going to have a sufficient vote to pass this,” Fratto said at the daily press briefing. “We’re certainly confident that we are. We’re not taking it for granted. These are very legitimate concerns and questions that members have. We’re going to keep working with them right up to the vote. We will not take a single vote for granted. And but then we’ll be watching the members vote just like all of you will.”

Bush spent the morning working the phones, armed with a list of about two dozen skeptical Republicans, although aides weren’t sure how far down the list he got. Vice President Dick Cheney and senior aides, including chief of staff Josh Bolten and counselor Ed Gillespie also were making calls – in fact, “I think everyone with a phone is calling to see if we can shore up a member who may be skeptical of the proposal,” Fratto said.

The feedback from Bush’s calls seemed mixed – “some people committed to voting for the bill, others remain skeptical,” Fratto said. For the doubters, Bush promised to get them more information. As the vote neared, Fratto acknowledged that “there are still questions out there, and we’re not surprised that there’s skepticism about the bill. Like I said, we put this program before the Congress in very short order, and it’s an incredibly complex issue that we’re trying to deal with.”

Increasingly in recent days, White House officials have worried that the bill’s potential benefits for troubled banks and other financial institutions have become a political liability for the legislation. They’ve complained about news coverage referring to it as a “bailout,” saying that prejudices their approach. They prefer to call it a rescue plan.

“People have an image of this that, this money is going to…support executives on Wall Street,” Fratto said. And what we’re really trying to do is to fix a systemic problem in our economy. By the way, it’s a problem that already exists. We want to prevent it from getting much, much worse in a way that would shut down our economy.”

Perhaps sensitive to the plan’s optics, Bush increasingly has been describing the consequences of inaction in everyday Main Street terms, both in his public comments and in phone calls to members. He’s talked about the impact of restricted lending on small businesses; steep losses to individual retirement savings accounts; the possibility that community banks could fail.

“He is making it clear that this about Americans in their communities,” Fratto said. “That’s what this is about. It’s about family finances. It’s about 401(k) retirement plans. It’s about small businesses. It’s about even larger businesses that do a great deal of hiring and are a strength in our economy and we want to keep them strong. So that’s certainly part of the message.”

White House officials also have worried that they allowed the bill to be tagged as a $700 billion program, without pointing out forcefully enough that the actual cost to taxpayers would likely be far lower than that. That’s because assets the government buys up would later be sold back into the market, and officials are counting on making a profit in many cases. That concern appeared to lead the White House budget office to put out a favorable estimate of the plan’s ultimate costs on Sunday night. The Congressional Budget Office did the same.

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